Monday, March 16, 2009

Comment on the global recession reaching Africa

For the last few years, economic growth in Africa was really moving up fast. But, the credit crisis that began in America is now reaching the underdeveloped world.

A commentary in today's Toronto Star spells out what might be ahead for Africa. Craig and Marc Kielburger describes the fear that the global economic recession could undo all of Africa's recent gains.

The past decade has seen many changes to Africa's economic climate. Foreign aid has helped create jobs through development projects. Soaring commodity prices made raw materials enormously profitable. The region even began moving into stock markets. Companies gained capital investment. A middle class started to emerge as people followed the North American example and began investing their savings.These markets were fast growing — the Nairobi Stock Exchange expanded from about $1 billion dollars in 2002 to $12 billion in 2008. And, despite the crippling poverty and AIDS pandemic still ravishing the continent, the World Bank estimated 6.5 per cent growth for the region in 2008.

Along came the financial crisis. As North American markets plunged, Africa followed suit. The Nairobi Stock Exchange has lost nearly half its value since October on declining oil, mining and commodity stocks. As well, tourism - East Africa's leading foreign exchange earner — is expected to fall by 20 per cent in 2009.

Then, there is aid. Expatriates working overseas and sending money home are being laid off. And aid from Western nations has been readjusted as these governments bail out their own industries.

The United States has just started distributing its $787 billion (U.S.) bailout to jumpstart its domestic economy. But, that kind of money simply isn't available in African economies. Unable to finance stimulus for the local economy, these nations need international aid to stay afloat.

"If the issues of Africa and the rest of the third world are not given the same or more development aid, a lot of the good work is likely to regress, plunging the continent back into poverty, high mortality rates, war and disease," says N'drangu.